Challenges Of Energy Transition In India

At COP26 Glasgow Summit, India made ambitious targets that by 2030 India will have 500 GW of non-fossil electricity generation capacity and 50% of total energy use will be from renewable sources. However this energy transition is not a facile process.

• Over 80% of India’s energy needs are met by three fuels: coal, oil and solid biomass. Coal has underpinned the expansion of electricity generation and industry, and remains the largest single fuel in the energy mix. Oil consumption and imports have grown rapidly on account of rising vehicle ownership and road transport use. Biomass, primarily fuelwood, makes up a declining share of the energy mix, but is still widely used as a cooking fuel.

Challenges of Energy Transition in India

Energy transition as a process requires coordination of various policy and governance measures. The challenges of energy transition are:

• Dependence on Coal: Coal is the dominant component of India’s energy mix.Following factors make energy sector heavily dependent on coal:
• Domestic availability of coal,
  • Concerns on potential supply fluctuations with regard to petroleum sources,
  • Lack of adequate alternate supply sources to replace coal usage, and
• Traditional dependency of power plants on coal.

Coal meets majority of the energy needs in the power sector, iron and steel sector and cement sector. Coal is expected to remain India’s most important energy source till 2031-32 and possibly beyond. As of September 2021, Coal alone accounted for nearly 50% of India's installed capacity in power generation.

• Absence of Proper Institutional Mechanism: Coordinated policy efforts and institutional mechanism play an important role in energy transition in any economy. The challenges to energy transition with respect to institutional mechanism are-
  • The lack of specific administrative and legal mechanisms,
  • Energy transition initiatives are fragmented without specific support of strong legal mechanisms, and
  • A newly built institution to govern a transition will face conflicts with existing energy institutions that are conventionally supporting a specific energy sector.
• Low Economic Viability of Transition: Financial concerns of energy transition from a conventional fuel source to non-conventional sources adversely affect the transition:
  • Huge investment is required for building new energy infrastructures and development of supply sources
  • The fossil fuel sector, especially petroleum sector is one of the major sources of tax revenue for government.
  • High transaction costs (which involves appointing suitable consultants and vendors for execution) relative to project size, especially in the micro, small-scale and medium enterprises (MSME) sector, make energy efficiency investments unattractive for investors.
  • A variety of subsidies and taxes distort the energy market and promote the use of inefficient over efficient fuels. They also make Indian exports and domestic production uncompetitive as energy taxes are not under GST and hence, no input credit is given.
• Limitations of Renewable Energy: The renewable energy resources have following limitations which hinder transition process:
  • Higher initial cost, that can be excessive and a deterrent for users
  • High cost of storing systems
  • Renewable energy depends on weather conditions, thus cannot be available 24*7
  • Large land areas are required to install the necessary renewable energy technology
• Inefficiency in Power Sector: The power sector has following limitations which will not be resolved by shifting to renewable energy resources:
  • High aggregate technical and commercial (AT&C) losses
  • Old inefficient plants continue to operate whereas more efficient plants are underutilized
  • Unmetered power supply to agriculture provides no incentive to farmers to use electricity efficiently.
  • High industrial/commercial tariff and the cross-subsidy regime have affected the competitiveness of the industrial and commercial sectors.

Benefits of Energy Transition

• Reduce carbon dioxide emissions
• Create employment opportunities
• Improve public health
• Increase resilience of communities in the aftermath of the pandemic shock

Possibilities and Prospects

India’s energy transition is an inspiration for many emerging economies. A people-centric approach, supported by good policy design, will not only help India build a clean and inclusive energy future, but could also provide a model for other countries and communities worldwide. Some suggestions are as follows:

• Share the benefits of clean energy technologies with micro-entrepreneurs and small businesses.
• Policies dedicated to promote renewables, incentivise investment in decentralised low-carbon power sources like rooftop solar, and train and build the capacity of clean energy entrepreneurs should be formulated.
• Ensure gender parity in policies related to renewable energy. Incorporate energy efficiency and green methods in construction works.
• Engage the youth as they can provide technical and social solutions to ensure that the energy transition is sustainable, inclusive and enduring.